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Tribune Media Company Reports Second Quarter 2017 Results

SECOND QUARTER 2017 FINANCIAL HIGHLIGHTS (compared to second quarter 2016)

  • Consolidated operating revenues fell 2% to $469.5 million; excluding political advertising and real estate revenues, consolidated operating revenues increased 2%
  • Strategic shift at WGN America to a higher return original programming strategy resulted in $20 million of additional expense for cancellation costs, accelerated amortization of license fees and the write-off of certain other capitalized program development projects
  • Consolidated operating profit, which includes the above $20 million of additional expenses at WGN America, was $18.3 million, compared to $56.2 million for the second quarter of 2016
  • Consolidated Adjusted EBITDA, which includes the above $20 million of additional expenses at WGN America, decreased to $95.4 million from $125.1 million in the second quarter of 2016
  • Total Television and Entertainment net advertising revenues (which include political and digital revenues) fell 7%, to $312.9 million
  • FCC spectrum auction proceeds of $185 million were received by the Company in the third quarter of 2017 with remaining proceeds of $5 million expected in the second half of 2017
  • CareerBuilder sale closed on July 31, 2017 and the Company received cash of $158 million while retaining an approximate 7% ownership interest on a fully diluted basis

"Our financial results for the second quarter reflect our focus on continued expense management and positioning the company for long-term profitable growth," said Peter Kern, Tribune Media's Chief Executive Officer. "We saw strong sequential growth in retransmission revenues during the quarter, which helped offset some softness in core advertising at the national level. While our overall performance was significantly affected by non-recurring expenses and accelerated amortization related to the shift in programming strategy at WGN America, those changes are now behind us, and we expect a much more profitable 2018 with more original hours than the network has ever carried. We continue to aggressively manage expenses across the business; adjusted for the non-recurring costs at WGN America, total consolidated cash expenses were flat despite the continuing increases in network affiliate fees and the increased level of original programming amortization. We also continued monetizing non-core assets, as we sold several real estate properties in the first half of the year, and more recently participated in the sale of CareerBuilder and received a significant portion of our spectrum proceeds. Finally, we remain on track to close our previously announced transaction with Sinclair."

SECOND QUARTER AND YEAR-TO-DATE RESULTS

Consolidated

Consolidated operating revenues for the second quarter of 2017 were $469.5 million compared to $479.8 million in the second quarter of 2016, representing a decrease of $10.3 million, or 2%. The decrease was primarily driven by lower core advertising and political advertising, as well as a decrease in real estate revenues as a result of the sales of certain properties in 2016 and 2017. These declines were partially offset by increases in retransmission and carriage fee revenues.

For the six months ended June 30, 2017, consolidated operating revenues were $909.4 million compared to $948.3 million in the six months ended June 30, 2016, representing a decrease of $38.8 million, or 4%.

Consolidated operating profit was $18.3 million for the second quarter of 2017 compared to operating profit of $56.2 million for the second quarter of 2016, representing a decrease of $37.9 million. The decrease was primarily attributable to lower Television and Entertainment operating profit as a result of higher programming expenses driven by $20 million of additional expense related to the strategic shift toward more profitable original programming at WGN America and a higher operating loss in Corporate and Other due to lower revenues driven by the sale of real estate properties in 2016 and 2017 and higher transaction-related costs. For the six months ended June 30, 2017, consolidated operating profit decreased $83.1 million to $3.1 million from an operating profit of $86.2 million in the six months ended June 30, 2016.

In the second quarter of 2017, the Company recorded a non-cash pretax impairment charge of $58.8 million ($44.5 million after tax), or $0.51 per common share, to further write down its investment in CareerBuilder based on the transaction value contemplated in the CareerBuilder sale agreement. In the six months ended June 30, 2017, the total non-cash pretax impairment charges to write down the Company's investment in CareerBuilder totaled $181 million ($124.5 million after tax), or $1.43 per common share.

Consolidated loss from continuing operations was $29.8 million in the second quarter of 2017 compared to $152.6 million in the second quarter of 2016. Diluted loss per common share from continuing operations for the second quarter of 2017 was $0.34 compared to $1.66 for the second quarter of 2016. Adjusted diluted earnings per share ("Adjusted EPS") for the second quarter of 2017 was $0.36 compared to $0.52 for the second quarter of 2016. Both diluted loss per common share and Adjusted EPS in the second quarter of 2017 include a $2.7 million, or $0.03 per share, benefit primarily related to expected refunds of interest paid on prior tax assessments and in the second quarter of 2016 include a $1.8 million, or $0.02 per share, benefit related to certain state income tax matters and other adjustments.

Consolidated loss from continuing operations was $131.0 million for the six months ended June 30, 2017 compared to $137.5 million for the six months ended June 30, 2016. For the six months ended June 30, 2017, diluted loss per common share from continuing operations was $1.51 compared to $1.50 for the six months ended June 30, 2016. Adjusted EPS for the six months ended June 30, 2017 was $0.30 compared to $0.74 for the six months ended June 30, 2016. Both diluted loss per common share and Adjusted EPS include an income tax benefit of $2.1 million, or $0.02 per share, for the six months ended June 30, 2017 and an income tax charge of $2.0 million, or $0.02 per share, for the six months ended June 30, 2016 related to certain tax adjustments.

Net loss was $30.4 million in the second quarter of 2017 compared to $161.6 million in the second quarter of 2016. Net loss was $116.0 million for the six months ended June 30, 2017 compared to $150.5 million for the six months ended June 30, 2016.

Consolidated Adjusted EBITDA decreased to $95.4 million in the second quarter of 2017 from $125.1 million in the second quarter of 2016, representing a decrease of $29.7 million, or 24%. The decrease in consolidated Adjusted EBITDA was primarily attributable to higher programming expenses and lower net core advertising and political advertising revenues. This decline was partially offset by increased retransmission revenues and carriage fees revenues. For the six months ended June 30, 2017, consolidated Adjusted EBITDA decreased $69.1 million, or 31%, to $152.9 million as compared to $222.0 million in the six months ended June 30, 2016.

Cash distributions from TV Food Network in the second quarter of 2017 were $38.1 million compared to $36.3 million in the second quarter of 2016. Cash distributions for the six months ended June 30, 2017 were $149.7 million compared to $125.6 million for the six months ended June 30, 2016.

Television and Entertainment

Revenues were $466.1 million in the second quarter of 2017 compared to $468.1 million in the second quarter of 2016, a decrease of $2.1 million. The decrease was driven by a $17.2 million decrease in net core advertising revenue and an $8.9 million decrease in net political advertising revenue, and was largely offset by an increase in retransmission revenues of $21.7 million, or 26%, and an increase in carriage fee revenues of $1.5 million, or 5%.

Television and Entertainment segment revenues for the six months ended June 30, 2017 were $902.1 million compared to $924.0 million for the six months ended June 30, 2016, a decrease of $21.9 million, or 2%. The decrease was driven by a $35.0 million, or 6%, decrease in net core advertising and a $22.6 million decrease in net political advertising, and was partially offset by an increase in retransmission revenues of $32.4 million, or 19%, and an increase in carriage fee revenues of $4.1 million, or 7%.

Television and Entertainment operating profit was $50.2 million for the second quarter of 2017 compared to $83.3 million for the second quarter of 2016, a decrease of $33.1 million, or 40%. The decrease was primarily due to increased programming expense of $34.3 million, primarily due to $20 million of additional expense related to the shift in programming strategy at WGN America in the second quarter of 2017, which included cancellation costs for Outsiders and Underground and the associated accelerated amortization of the remaining program assets for both shows as well as the write-off of certain other capitalized program development projects. The remaining increase was due to $8 million of higher network affiliate fees and $6 million of higher amortization of license fees primarily related to original programming that aired in the quarter.

Television and Entertainment Adjusted EBITDA was 1.7 million for the second quarter of 2017 compared to $141.7 million in the second quarter of 2016, a decrease of $30.0 million, or 21%, primarily due to increased programming expenses, as described above, as well as lower advertising revenues.

For the six months ended June 30, 2017, Television and Entertainment operating profit was $70.2 million as compared to $142.0 million for the six months ended June 30, 2016, a decrease of $71.7 million, or 51%. Television and Entertainment Adjusted EBITDA was $186.9 million as compared to $257.7 million for the six months ended June 30, 2016, a decrease of $70.8 million, or 27%.

Corporate and Other

Real estate revenues for the second quarter of 2017 were $3.5 million, compared to $11.7 million for the second quarter of 2016, representing a decrease of $8.2 million, or 70%. The decrease was primarily driven by lower revenues due to the sale of real estate properties in 2016 and 2017. Real estate revenues for the six months ended June 30, 2017 were $7.3 million, compared to $24.3 million for the six months ended June 30, 2016, representing a decrease of $16.9 million, or 70%.

Corporate and Other operating loss for the second quarter of 2017 was $31.9 million compared to a loss of $27.1 million for the second quarter of 2016. The increase in the loss was primarily attributable to lower real estate revenues, as described above, and higher transaction-related costs. Corporate and Other Adjusted EBITDA represented a loss of $16.3 million for the second quarter of 2017 compared to a loss of $16.6 million for the second quarter of 2016. The loss was down slightly from the second quarter of 2016 despite the loss of real estate revenues from property sales as a result of lower costs. For the six months ended June 30, 2017, Corporate and Other operating loss was $67.1 million compared to $55.8 million for the six months ended June 30, 2016. Corporate and Other Adjusted EBITDA represented a loss of $33.9 million, compared to a loss of $35.6 million for the six months ended June 30, 2016.

Discontinued Operations

On December 19, 2016, the Company entered into an agreement with Nielsen Holding and Finance B.V. ("Nielsen") to sell equity interests in substantially all of the Digital and Data business operations for $560 million in cash, subject to certain purchase price adjustments (the "Gracenote Sale"). The Company completed the sale on January 31, 2017 and received gross proceeds of $584 million, including a purchase price adjustment of $3 million. The historical results of operations for the businesses included in the Gracenote Sale are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this release are to Tribune Media Company's continuing operations.

RETURN OF CAPITAL TO SHAREHOLDERS

Quarterly Dividend

On August 2, 2017, the Board of Directors (the "Board") declared a quarterly cash dividend on the Company's common stock of $0.25 per share to be paid on September 5, 2017 to holders of record of the Company's common stock and warrants as of August 21, 2017. Future dividends will be subject to the discretion of the Board and the terms of the agreement and plan of merger between the Company and Sinclair Broadcast Group, Inc. ("Sinclair"), dated May 8, 2017 (the "Merger Agreement"), which limits our ability to pay dividends, except for the payment of quarterly cash dividends not to exceed $0.25 per share and consistent with record and payment dates in 2016.

Stock Repurchase Program

As of August 8, 2017, the remaining authorized amount under the current stock repurchase program totaled $168 million. The terms of the Merger Agreement prohibit the Company from engaging in additional share repurchases.

RECENT DEVELOPMENTS

Sinclair Acquisition

On May 8, 2017, the Company entered into a Merger Agreement with Sinclair, providing for the acquisition by Sinclair of all of the outstanding shares of the Company's Class A common stock and Class B common stock by means of a merger of Samson Merger Sub Inc., a wholly owned subsidiary of Sinclair, with and into Tribune Media Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Sinclair. See "Important Additional Information and Where to Find It" below.

On August 2, 2017, the Company received a request for additional information and documentary material, often referred to as a "second request", from the United States Department of Justice (the "DOJ") in connection with the Merger Agreement. The second request was issued under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Sinclair received a substantively identical request for additional information and documentary material from the DOJ in connection with the transactions contemplated by the Merger Agreement. Consummation of the transactions contemplated by the Merger Agreement is conditioned on expiration of the waiting period applicable under the HSR Act, among other conditions. Issuance of the second request extends the waiting period under the HSR Act until 30 days after Sinclair and the Company have substantially complied with the second request, unless the waiting period is terminated earlier by the DOJ or the parties voluntarily extend the time for closing.

Sale of Digital and Data Business

The Company completed the Gracenote Sale on January 31, 2017 and received gross proceeds of $581 million. In the second quarter of 2017, the Company received additional proceeds of $3 million as a result of purchase price adjustments. In the six months ended June 30, 2017, the Company recognized a pretax gain of $35 million as a result of the sale. On February 1, 2017, the Company used $400 million of proceeds from the Gracenote Sale to pay down a portion of the Company's term loan facility.

Real Estate Transactions

In the six months ended June 30, 2017, the Company sold six properties for net proceeds totaling $60 million, as further described below. The Company defines net proceeds as pretax cash proceeds on the sale of properties, net of associated selling costs.

On January 26, 2017, the Company sold its Denver, CO property for net proceeds of $23 million, which approximated the carrying value, and entered into a lease for the property. On January 31, 2017, the Company sold one of its Chicago, IL properties for net proceeds of $22 million and entered into a lease with a term of 10 years, subject to renewal, retaining the use of more than a minor portion of the property. The Company recorded a deferred pretax gain of $13 million on the sale, which will be amortized over the life of the lease in accordance with sale-leaseback accounting guidance.

On April 21, 2017, the Company sold two of its Chicago, IL properties for net proceeds of less than $1 million. On May 22, 2017, the Company sold two of its Baltimore, MD properties for net proceeds of $15 million. The net proceeds on the sales of these properties...


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